The reduction in interest rates by banks in home loans has finally helped banks to garner a higher month-on-month growth this year in the festive season compared with the growth recorded last year. The growth in outstanding home loans in absolute terms was Rs 7,200 crore on a month-on-month basis in October compared with a growth of Rs 3,046 crore in October 2011, shows Reserve Bank of India (RBI) data. Home loans contribute the largest segment of retail loans for banks.
The same was the case with vehicle loans and there also banks had reduced interest rates. The growth in outstanding vehicle loans in absolute terms was Rs 1,300 crore on a month-on-month basis in October compared with a growth of Rs 1,107 crore in October 2011. The growth was despite the fact that fuel prices rose.
D Sampath, head-retail banking, Federal Bank, said: "Growth in home loans and vehicle loans continued even in November and is expected to continue even in December."
To boost the growth, banks had in fact reduced or waived of processing charges.
The entire outstanding retail loans portfolio of the industry grew by Rs 14,900 crore on a month-on-month basis in October compared with a growth of Rs 7,627 crore in October 2011. In a scenario where corporate credit continues to be sluggish, banks are focusing more on retail loans.